Oral evidence

Taken before the International Development Committee on Thursday 6 November 2003

Members present:

Tony Baldry, in the Chair

John Barrett

Mr John Battle

Hugh Bayley

Mr Tony Colman

Mr Piara S. Khabra

Chris McCafferty

Tony Worthington

__________

Witnesses: THE RT HON GORDON BROWN, a Member of the House, Chancellor of the Exchequer, THE RT HON HILARY BENN, a Member of the House, Secretary of State for International Development, JON CUNLIFFE, Managing Director, Macroeconomic Policy and International Finance, and SHRITI VADERA, Council of Economic Affairs, HM Treasury, and PETER GRANT, Director of International Division, DFID, examined.

 

Q1  Chairman: Chancellor, welcome to you and your team. Secretary of State, thank you very much for coming. Chancellor, I think this is the first time you have addressed the Select Committee since the birth of your baby son, so many congratulations.

Mr Brown: Thank you very much.

 

Q2  Chairman: I understand that you would like to make a statement, so why do you not do that and then we will get on to some questions?

Mr Brown: Chairman, it is a great privilege for both Hilary Benn and myself to be with you today. I should perhaps introduce the people who are with us; Peter Grant with Hilary Benn, Shriti Vadera from the Treasury, Jon cunliffe, the Head of Macroeconomic and International Policy. Firstly, let me thank the Committee for the all-party commitment that has been made to the developing world, for your role in dealing with the problem of debt relief, for your support for the International Finance Facility. What I would like to do, in very brief remarks, is to report to you on what I believe are the repercussions from the meeting of the International Monetary Committee that I chaired in Dubai and the World Bank Development Committee chaired by Trevor Manuel, the Finance Minister of South Africa. We met in Dubai at a time when the world economic outlook is improving. We were positive about the opportunities ahead for strengthening the global economy, but if we are to ensure higher growth not only must each continent live up to its responsibilities, but we must bring developing countries fully into the development process. It is worth bearing in mind that today developing countries account for 80 per cent of the world's population, 5 billion people, by 2050 it will be 90 per cent of the world's population, but they only account for 20 per cent of the world's GDP. The World Bank estimated that just to maintain the current average rate of world economic growth demands faster growth rates in developing countries, a doubling in the share of global GDP to 40 per cent by 2050. In other words, to sustain current world growth rates the GDP of developing countries which is just $6 trillion to date would need to rise to $56 trillion over the next 50 years. So it is clear both for moral and social but also for economic reasons why the whole world needs a new deal for the developing countries. In return for developing countries pursuing anti-corruption, pro-stability, pro-trade and pro-investment policies developed countries should, in our view, make the necessary funds available to tackle the long standing problems of ill health, illiteracy, poverty and under-development. In the 1940s by transferring 1 per cent of national income every year for four years from America to Europe the Marshall Plan was not only an act of charity but a frank recognition that peace and prosperity throughout the world was indivisible and that great international co-operation was required on a massive scale. I believe that what we need now is nothing less than a modern Marshall Plan for the developing world because we know now that if we are to meet the Millennium Development Goals that were agreed little more than two years ago, huge amounts of additional resources will have to be made available. I think the Committee knows that 115 million children are not in school today, half of them in Africa. 30,000 children are dying every day from preventable diseases. There are 30 million victims of HIV/AIDS in Africa alone. There are one billion living in extreme poverty. But we would not meet the millennium development targets on primary education for Sub-Saharan Africa, given the current rate of progress, until 2129 and we would not meet the millennium development targets on extreme poverty until 2147 and on child mortality until 2165. So the need for extra resources is obvious. We believe that at least $50 billion extra a year will be required and we think that is a doubling of aid currently flowing to developing countries that is needed as soon as possible. We remain committed to reaching the target of 0.7 per cent of GDP and have raised development aid, but it is clear that internationally the scale of the resources required to meet these Millennium Development Goals and make further progress on debt relief can only be met by new financial means to deliver the higher levels of support necessary. Development aid to sub-Saharan Africa has fallen from $33 per head to $20 per head in the last ten years, but yet the problems have got worse. We have subscribed to the aim to get 3 million people on to anti-retrovirals by 2005 and health alone will need 10 to 20 billions extra a year. This is the thinking behind the International Finance Facility; to double the amount of development aid from 50 billion to 100 billion a year, partly by leveraging in private finance. I am pleased to report that that proposal received wide support from other countries at Dubai, in particular from our European partners and from developing and emerging market countries. The IMF and the World Bank have agreed to do further work on the proposal. They will report back at our next meetings in 2004. In parallel, we will be consulting widely with developing countries and emerging market countries to develop this proposal further. The IMF and World Bank report will come next year and with the UK's presidency of the G7 in 2005 we have an opportunity to tackle the great poverty challenges facing the developing world. Our priority will be to resolve how we meet the 2015 commitments. In health it will be to ensure the proper financing of health care delivery systems, to abolish iniquitous health charges and today, of course, we know that as little as 20 cents a week is spent on the health care of the typical African citizen. Treasury and DFID are meeting with representatives of the Global Alliance for Vaccines and Immunisation, who are interested in applying the principles of the International Finance Facility to health to make an immediate difference in the provision of health care. At the same time, of course, we will continue to attempt to make progress, as you have discussed with Patricia Hewitt and Hilary, on trade issues, including a deal to phase out agricultural protectionism. With 2005 not only our G7 presidency, but the fifth anniversary of Jubilee 2000 coming 20 years after Live Aid, I believe that it is a proper time to redouble our efforts to complete debt relief, provide a robust exit from unsustainable debt. 27 countries are now part of the process, but we must now move in to a further stage and we are prepared to consider radical means to ensure that debt relief is properly provided. We must, in our view, seize the chance to deliver on our promises to the poorest countries, ensuring that we provide the finance that is urgently needed, building on the progress we have already made to develop the International Finance Facility for which we have all-party support in the United Kingdom. The aim is to achieve the Millennium Development Goals in all countries.

 

Q3  Chairman: Chancellor, thank you very much. Firstly, you, Clare Short and everyone deserve credit for having taken forward the International Financing Facility. Can I just put three very brief questions? After 2015 - accountability and international support - as I understand it from the document published by the Treasury, 80 per cent of the International Financing Facility will be generated through market borrowing. So the concept of the IFF, if I understand it correctly, is to borrow significant sums of money up to 2015 to meet the Millennium Development Goals and I think the ODI have estimated that the IFF would therefore accumulate a debt stock amounting at its maximum to over $800 billion. I may have misunderstood that and if I have, please correct me, but I am just interested in how the debt is going to be serviced after 2015. On accountability, to whom will the IFF disburse or will they be accountable? On international support, when the Select Committee was in Washington, I think it is fair to say that people in the World Bank and elsewhere gave a cautiously neutral but welcome approach to the IFF concept, but one's impression from the US Government was that they were not so warm in their support. Is that still the case and, if so, can the IFF function without US support and what progress has been made on that?

Mr Brown: That is quite a number of questions, Chairman, and I am grateful to you for your interest in this and for the discussions that you and your Committee have had with the World Bank and the IMF on this matter. Let us remember the background to this, first of all. There have been a number of proposals for raising additional money, the scale of money that we need to finance the Millennium Development Goals. There has been the Tobin Tax Proposal, there has been the Soros Proposal on special drawing rights at the IMF, there has been discussion of energy taxes and everything else. Each one of them comes down to the central question; is there the political will on the part of individual governments to make the additional resources available? We believe that our proposal is the one that is likely to command the most support over the period of time and the reason why we are setting a pattern of higher investment based on private lending until 2015 is principally, indeed entirely, to meet the Millennium Development Goals. So it is the aim of the international community to meet the Millennium Development Goals, so we have to have additional resources between now and 2015. If we are to meet the Millennium Development Goals, then another choice is available to the world. It can either use the opportunity that has been provided by the increased amount of aid that has been given by individual governments of the period from now to 2015 to expand the amount of aid or not, but that is a political choice that is made at that time. I am not saying that after 2015 aid budgets are going to be raided to pay interest payments on money that has been borrowed. I am saying that is a choice then for governments to make as to how much they wish to increase aid budgets after 2015. The problem, however, which we are dealing with is how can we get the additional resources that are necessary for our priority which is, of course, to meet the Millennium Development Goals by 2015 and I would regard the money we are raising now as an investment in the future to prevent problems that would be worse after 2015 if the money was not spent. So the IFF is an investment now to help future generations and to avoid these problems, but in 2010, 2012 and 2014 I believe you are in a better position to decide to spend more on aid, having already made a decision a few years earlier that you want to increase the levels of aid. I am very pleased that Hilary Benn has, in his speech in New York, been such an active proponent of the IFF and of this increased level of resources. As far as support is concerned, we have, as you rightly identified, talked to a large number of governments about this. We continue our discussions with the American Government. You have got to remember that when the World Bank and the IMF decided to do further work on this, this was a decision made by all the member governments involved in the IMF and the World Bank, including the United States of America. So while there are particular issues about the annual basis on which allocations of money are made in the United States through their Congress, which have been rightly raised with us and we have put forward proposals to solving that problem, there is an interest in the United States of America, across the political spectrum, from the churches and the NGO organisations, in what we are proposing. I was pleased I was able to go to the IMF meetings with support from the European Union. I am also pleased to say that we have had regular meetings with the developing countries and it is interesting that they are now pushing this very, very hard. We will have a conference with the French and Mr Mer, the French Finance Minister, has called a conference with developing countries in Paris in February next year. We are having very active support given to us from the G7 Presidency this year, which is the French Government. I do not know if I have answered all your individual questions on this, but I hope I have dealt with at least some of them.

 

Q4  Mr Colman: Chancellor of the Exchequer, I hope your statement and your explanation is carried on in Parliament today, yesterday and tomorrow morning because it is a very important clarion call not only to us but to all the NGOs and civil society in this country to campaign and to pass that message around the world. My questions relate to the Development Committee communiqué that came out of the meeting in Dubai. First of all, at Cancún there was an initiative announced by the Bank and the Fund to help the weakest and most vulnerable countries adjust to trade liberalisation to help them cope with potential negative impacts of reform such as preference erosion and loss of tariff revenues. In paragraph 5 of the communiqué it seems to be rather muted in terms of the endorsement of that policy and I was wondering whether you would like to say what actually happened there. Was this endorsed? Is work going to take place on this very important new initiative, particularly ahead of the December 15 and 16 meeting of the WTO to take forward the Doha Agenda?

Mr Brown: It may be that Hilary wishes to add something to what I am saying, but I think you will find that the communiqué is actually quite strong and if you take the IMFC communiqué and the World Bank communiqué together, there was no doubt about the urgency that people attach to the re-opening of the World Trade Organisation negotiations. We had a report at the meetings from the Deputy Director of the WTO about these very issues. We agreed it was urgent that action be taken to resume the negotiations which had broken down over one or two particular issues. I think there was a strong view amongst many of us that the investment and competition issues should be withdrawn from the negotiating table and there was also a strong view that America and Europe together could do more to help resume the negotiations. As far as the support of the World Bank and the IMF is giving to countries that are affected, what we are really talking about is how support can be given so that you can sequence liberalisation and the opening up of capital markets generally. I believe that is a responsibility of the international institutions and one that they are willing to discharge.

Hilary Benn: Just to add to that, if I may, notwithstanding the breakdown of the talks at Cancún, for the reasons that the Chancellor has just outlined, it is very important that this work continues because it is about practical preparation for this process. It is something that we very strongly support. In fact, we have got a conference that we are organising with a number of other partners next month at which we are going to be looking at this precisely because we welcome the initiative and it is one that I think all of us want to see taken forward.

Mr Brown: Can I just add that we also urged, the communiqué said, continued efforts to tailor bank lending activities to support country and trade initiatives translating analysis and diagnostics into meaningful operations and that is in the World Trade section.

 

Q5  Mr Colman: Can I take you to paragraph 11 of the same communiqué and pick up two points there? First of all, it says that "We recognise that Poverty Reduction Strategy Programmes are charged with multiple and sometimes competing objectives". What do you believe these multiple and competing objectives are and what is being done to ensure that the objectives are made compatible and that national ownership of development strategies, including the macroeconomic policy component, is made a reality?

Hilary Benn: We strongly support the Poverty Reduction Strategy process. The thing that is most important, and I think that is reflected in what the communiqué was saying, is that there should be country ownership of this process. I think we are making reasonable progress. 32 countries now have full PRSPs, a further 16 have got interim ones and I think the progress report that was considered says "We are making progress, but we need to get them more embedded within the system". I think we need to recognise also that it is leading to some institutional change. For example, a better focus on managing public expenditure is helping to improve budgeting systems. I think people are just learning as they are going and if you look at countries like Uganda, Mozambique and Rwanda you would see that happening. One of the other problems that has arisen is reporting burdens. This is an issue about which the Committee is rightly concerned. We are concerned. It is important that in tailoring PRSPs and the linkage with the work that the Bank and the Fund are doing, that we minimise the reporting burdens so that we can maximise the chances that there is country ownership and the support that the Bank and the Fund then give reflects the work that has been contained in the PRSPs. That really is a process where people are learning as they try and bring the two things together.

Mr Brown: Because it is shared. It is not in the World Bank communiqué, but I just emphasise that on the IMF side we set up a British initiative, the Independent Evaluation Office, and one of the things that they are going to do over the next year is to evaluate the funds programmes for the poorest countries. I believe that that will answer or help to elucidate some of the questions that you are raising and I hope the Committee will take an interest in their findings.

 

Q6  Mr Colman: Indeed. Towards the end of that same paragraph it talks about the Poverty and Social Impact Analysis, PSIA, and I know that the UK Government has been a strong proponent of this. Could I ask what would be the respective roles of the Bank and the Fund in delivering progress on PSIA?

Hilary Benn: We are looking to them to work closely together on this. As you say, we paid for some of the pilot studies in DFID to get this going and we are working, both with the Bank and the Fund, to ensure that the work of the PSIAs is reflected both in the IMF's Poverty Reduction and Growth Facility and the World Bank's Poverty Reduction and Support Credit. We are also supporting pilots in six countries. In fact, we have seconded two people to the World Bank to actually help them develop. Eventually we would like this work ideally to be done by the country governments themselves, but I think what this is adding to the process is a further look at the impact that change is going to have on poverty and broader society. I think progress is slightly slower here, let us be perfectly honest about this. I had discussions on this subject both with Jim Wolfensohn and Horst Köhler in Washington last week. It is still relatively early days. We think it is a very important tool to use to try and understand better what the impact of programmes is going to be, for that then to be reflected in the work that the Bank and the Fund are doing and we need to get on with this and then see them more widely used and better used and people paying more attention to the results.

 

Q7  Mr Colman: Could I ask either of you whether you support Oxfam's call for the establishment of minimum standards for PSIA to ensure national governments and civil society is involved and to make sure that PSIA is clearly linked to the PRSP process?

Hilary Benn: I think there is a tension here, in all honesty, between, on the one hand, if one is saying, with both PRSPs and in due course PSIAs, that we want there to be country ownership, it is important that there is not a rigid template which does not allow people to take account of the circumstances of their own particular country. On the other hand, it is important that the work is done rigorously and looks at all of the possible implications as far as poverty and the social impact is concerned. I think that we need to reflect on that because I would not want to have a straitjacket in doing this work but on the other hand we want to make sure that all of the things that need to be covered are covered in the process of doing the work.

 

Q8  Hugh Bayley: To return briefly to the IFF, nobody would want the train to move at the speed of the slowest coach, so how many of the G8 members would you need to agree to participate to be able to launch the IFF?

Mr Brown: There are a variety of means by which an IFF could be formed. It could be where you might say two or three are gathered together because an IFF could be formed by a very small number of countries but, of course, the most effective IFF would be if all the major donors were involved. Why the IFF is possible at this stage in our history is because of the Monterrey Consensus, because America agreed to increase its aid programme by $5 billion and because the European Union agreed to increase its aid to 0.39 by about $7 billion. The borrowing is on the strength of the 12 billion additional dollars that are being provided for aid and it is maximising, if you like, the impact of a commitment to additional aid. So the more countries that are involved, the more the IFF can be funded and the quicker it can move, obviously, to deal with the funding of the Millennium Development Goals. You may have noticed that the World Bank did its own study of absorptive capacity for aid and showed that $30 billion could be deployed immediately and within a year or two $50 billion a year, which is exactly the figure that we are talking about. So obviously the more countries the better, the more money there is available. You could, for example, have a European Finance Facility, you could have a number of countries who are the big donors who are increasing the rate fast coming together as a group, but we still believe it is possible to persuade all the major countries to come together. I should stress that this is not an alternative to moving to 0.7. Both these processes go together. The truth, however, is that if two or three countries did not get to 0.7 immediately then even if every other of the major donor countries did get to 0.7, you still would not raise the 50 billion that we are talking about which can be raised immediately by the IFF if all participate. So it is a way forward, not as an alternative to 0.7 but as a complementary to the move towards 0.7.

 

Q9  Chris McCafferty: I have got several inter-related questions. The Gender and Development Network, in a submission to the Committee, have suggested that Poverty Reduction Strategy papers have neglected gender considerations and they are therefore not an accurate analysis of poverty. I would like to know whether you agree with that. I am aware that Christian Aid have made a study of strategy papers on Tanzania, Bolivia, Yemen and Malawi and have identified that none of those papers have a gender perspective. So I would like to know what the Government is doing now to ensure that gender is taken seriously in strategy papers and what are the lines of responsibility within the DFID to ensure that gender analysis is taking place.

Hilary Benn: I accept entirely the argument that you put and it is very important, first of all, if PRSPs are going to work that they should look at all of the impacts. It seems very hard to me that you could comprehensively look at the question of the reduction of poverty without looking at the position of women in society and the impact that any changes are going to have on them precisely because they are women. I would also say that one of the reasons we are similarly keen on the poverty and social impact analysis process to be taken forward is that it seems to us that that gives you a further opportunity to make an assessment which will look at the impact as far as women are concerned. So we do need to see better monitoring. We need to see better consultation. Certainly through the PSIAs we need for there to be space to look at different policy options to get people to think more about if you do this what would be the consequence. I think one of the other lessons of the PRSP process, if I may just talk about the issue of water sanitation because it is an interesting indication of how the process may help to deal with the problem, it is generally felt that in PRSPs water and sanitation has not been given sufficiently high priority. In some countries where, as part of that process, they have then gone to community consultation and said "What do you think of it so far?" people have said in that case "Actually we think you should be doing more water and sanitation" and so if the PRSP process is followed through and governments having done them, then continue with consultation, go back and say "What do you think of the effects of what we have decided to do so far?" I hope that similarly the voice of women will be heard and will say "Actually we do not think that you have taken sufficient account of the impact on us". So this is a process that we are very keen to encourage, but in the end, like all of these things, it has to be embedded within the country systems to enable it to happen. Our job is to support but in the end they have got to be able to do it for themselves.

Mr Brown: I may just add, to complement what Hilary said, that the first Millennium Development Goal that has to be met is the 2005 goal for gender equality and that is one that will be missed under present progress and clearly that is one that we are giving a great deal of attention to in focussing people's minds on the importance of raising more money.

 

Q10  Tony Worthington: This is a similar question. Can I raise the roles of parliamentarians and the political process? In our travels we do not pick up a sense that parliamentarians have been heavily involved in the PRSPs and you will know that there is so much emphasis upon country ownership and so on. What are we going to do about that or are we misperceiving things? But that is the real sense that we pick up.

Hilary Benn: I think that that is a very fair reflection. It is something that certainly I raise in talking to developing country governments because it is something that we are very keen to encourage. There are one or two places where it is happening; Armenia and the Kovias (?) Republic is interesting. We have got a programme in Nicaragua specifically to try and encourage that kind of participation. Part of the answer is to do that, part of the answer is to develop understanding amongst parliamentarians of what the PRSP process is about and then, if I may say so, rely on the natural inclination of parliamentarians, if there is a process going on, to want to get involved, to question the people who are doing the work to call them to account in exactly the way that you are doing this afternoon because we think that this objective of country ownership would be added to if parliamentarians were more involved in the process. So we need to encourage, but I think it is also down to parliamentarians to understand better how the system works and then use the mechanisms that they have got through their own equivalent select committees and so on to call the people who are doing the work to account, ask them questions and influence what the PRSP is going to look like. In other words, so that people see it not as "This is a piece of paper you have got to do to satisfy somebody else and this does not have anything to do with all the issues that we are debating as parliamentarians in our country", but seeing it as an integral part of decisions that are going to be taken that will affect them, their constituents and the areas that they represent.

 

Q11  Tony Worthington: Could I just raise a separate issue? You will recall in the debate yesterday I talked about the Publish What You Pay Initiative, which I know has been to the G8 in the past. Did it come up this time and what progress is being made on that?

Hilary Benn: In relation to the meetings themselves, both the IMF and the World Bank are very supportive of the principle. We are discussing it with them for the very simple reason that greater transparency gives you greater accountability. It is a simple argument and therefore people publishing what they pay and publishing what they receive is, I think, a very powerful way of generating questions because once the information gets published your equivalent colleagues can start asking questions about what is happening to the revenues and so on and so forth. It really supports a number of other things that we are doing on that front to promote greater corporate responsibility. A lot of people are interested. A lot of people have expressed support. What we now have to follow through is how this works in practice. So following up the principles of the EITI with country governments to say "If you are up for this, what are you now going to do? What are going to be the structures and processes?" and those are conversations that we are keen to have and which we are having with a number of countries and in the process we have to build up momentum because as more people sign up to the principles of the EITI, as more countries begin to publish what they pay and what they receive, then I hope it will make it more difficult for those who are perhaps less inclined to do that to actually maintain the position that they currently hold.

Mr Brown: Just to say about the G8 process; it will be taken forward in the G8 over the next year and I think it is true to say that all the countries involved, including the United States, which was raised earlier, are supportive of taking this forward over the next period of time.

 

Q12  Tony Worthington: Are you saying that in the election year the American Government will be telling the American oil companies that they have to publish what they pay?

Mr Brown: It is voluntary, as you know. It is a voluntary code but I think it is true to say that the United States Government has expressed an interest in moving this forward. They are President of the G7 and G8 next year, so I hope we can make progress.

Mr Khabra: Rightly or wrongly the World Bank believes that it can achieve the objectives of the PRSPs by providing reduction support credits and also the budget support lending, but only 9 per cent of the World Bank's low income country lending is currently provided in the form of poverty reduction support credits. I do not believe that it will help in the reduction of poverty because there are very serious problems in some of the countries and I believe personally that globalisation is not going to help in some countries in the reduction of poverty. On top of that, the growing population in countries like India is another problem. Can I ask you the question; why is the proportion of low income country lending poverty reduction support credit still only 9 per cent and what does the UK Government propose to increase that?

Chairman: Order, order. Shall we adjourn for a minute and then we will come back and answer Piara's question. So if we are back at 25 past 4.

The Committee suspended from 16.04 pm to 16.23 pm for a division in the House

Q13  Chairman: Chancellor, Piara had asked you about why is the proportion of low income country lending through poverty reduction support credits still only 9 per cent and what steps do the UK Government propose to increase this?

Mr Brown: Hilary was going to answer that question when he came back. I shall happily leave it to him and perhaps I can deal with the other questions on my area.

 

Q14  Hugh Bayley: It is clear, Chancellor, that we cannot meet the Millennium Development Goals without substantial private sector investment. In evidence to us the Commonwealth Business Council say that in order, for instance, to meet the Millennium Development Goal of clean water, the rate of current expenditure on water will need to rise from 70 billion per annum currently to 170 billion. That will need private sector investment because the public sector cannot do it alone and yet a lot of people, including NGOs, have been critical of water privatisation in developing countries. Has the Government considered establishing a multi-stakeholder review of private sector participation in water and sanitation in order to work out how you could encourage private sector investment but ensure that it is invested in such a way to provide for the needs of poor users of water?

Mr Brown: Can I deal with the first two points of your question? The third point is actually relevant to what Hilary has been doing. You may have seen the Camdessus Report on water issues. It is interesting that he himself, as a former managing director of the IMF, proposed an IFF type of facility for dealing with the provision of water and the funding of the infrastructure improvements. I agree with you that there is a huge issue about charging. I mentioned in my initial remarks that we hope to see the abolition of health user charges. Obviously education user charges is a huge issue as well and the countries that have abolished user charges recently have shown great increases in the amount of people using schools and then when health user charges have been removed there has been a great increase in the number of people using health facilities. So these issues of charges are being dealt with in the discussions in the World Bank and the IMF on the specifics of the water initiative. Perhaps Hilary may wish to deal with this and Piara's question.

Hilary Benn: Yes, if I may. I mentioned, in answer to an earlier question, this issue of the extent to which water and sanitation has or has not been figuring in the PRSPs and described what I think is the way of trying to deal with that. I think that we take a pragmatic view about what is the best way to deal with this and, again, this is a matter for developing country decision and developing country ownership. Certainly the new World Development Report says that one should be looking at a mix of ways of doing this; it may be public sector, it may be private sector, it may be a mix, it may be a trust or whatever. If you are going to get the investment in that you need in order to improve the infrastructure, you have to find a way of paying for that. In answer to Mr Khabra's question about the PRSCs, I share your view about the very low take up. That is really due to the time it has taken to shift from the previous lending instruments, the due diligence requirements, and we would like to see them more used. I think the real answer to your question is that it is a matter of time. It is moving rather slowly, but we would like to see that process continue for the reasons that you identified in your question.

 

Q15  Mr Battle: Could I ask about the Heavily Indebted Poor Countries Initiative? Chancellor, you set out, at the beginning, the need for there to be a great growth in GDP and that the chances of reaching the Millennium Development Goals were somewhat slim. You gave dates ranging out to 2165 in one case and I think the general consensus is that six out of eight of the goals will not be met at all unless something happens. While accepting that debt relief itself will never take countries to meet those goals, I had a very helpful, may I say, fulsome and thorough report in a Parliamentary question that I asked of the Treasury from John Healey, the Economic Secretary, and in his reply, which more than shows that not only was the Government leading on this issue to press the debt redemption and reduction but at present 27 countries have reached decision point and have started to receive interim relief and of those eight have reached completion point. I just wondered whether you felt that the debt initiative had dried up and that we ought to ease back on it and concentrate on other forces, or whether in fact we could still keep the pressure up for debt reduction? That does obviously mean ensuring that the countries have their poverty reduction strategies in place.

Mr Brown: No, we have got to keep up the pressure. I did mention in my initial remarks the importance we attach to debt relief. Debt is the burden from the past that is often preventing countries being able to develop for the present and the future and we cannot have this unpayable burden of debt holding back forever the development prospects of the poorer countries. As far as the number of countries who could benefit from the HIPC Initiative, when we started in 1997 on the HIPC 1 there was only one country about to get in to it, so that 27 are in I think we do owe a debt of gratitude to the World Bank and the IMF for moving this forward. But the biggest debt of gratitude is to people all over the world who, in Jubilee 2000 in the churches and other organisations, made this such a central issue that action had to be taken. There are more countries who could get into the HIPC Initiative and that is particularly conflict countries. We want a post-conflict initiative that would actually help countries restructure their economies and get debt relief quickly. But of the countries eligible perhaps eight or nine are countries in conflict or just out of conflict but for whom debt relief would not be of great benefit at the moment because they are in conflict or not able to benefit from the debt relief because they are ravaged economies. We need a solution that helps them restructure as well as helps them get debt relief. Then, as far as the initial group of countries that are at either decision point or completion point, it is true to say, and I think we should acknowledge this, that the average amount of the revenue spent on debt servicing has fallen from 27 per cent to 11 per cent. So there has been an achievement and we must recognise that. Equally, the total figure of debt relief at completion point will be 70 billion and it could rise to 100 billion. It is also true to say that 65 per cent of the money that is saved from debt payments is going to health and education. So for all those people who have campaigned over the years this has been a major achievement, but there is far more to be done, not just for countries still to get in but for the 27 countries who are part of the process who may not exit from unsustainable debt unless we do other things. We are looking at the whole process of topping up. We want to see changes in that. There are anomalies in the process whereby countries that are getting 100 per cent debt relief are, in essence, subsidising countries only prepared to give 90 per cent relief. We are prepared to look at country by country solutions over time where we see anomalies and difficulties that arise from commodity price changes and everything else and that will have to be moved forward, but of course the better way, as I have indicated, of hoping to solve this problem not at the cost of money taken from other countries given to countries with debt burdens is expanding the amounts of money available and that is why I am interested in the IFF as a means by which we can eventually resolve these 80s and 90s problems of debt and allow these countries to get back to a position where they are both capable of going and borrowing on the international markets where that becomes necessary. So we are looking at a number of initiatives. We are prepared to go further. We are not happy. HIPC 2 was always the best we could get rather than the ideal and there is a lot more that we believe can be done. So we are actively looking, over the next few months, at what can actually be done and I think there is a World Bank report on these matters jointly with the Fund on the topping up and the sustainability question that will be coming in February and perhaps you may wish to hold a hearing on that because I think it is an important point which we have got to make decisions about how much more resources we can put into debt relief and we will be leading the way on that.

Q16  Mr Battle: That is very helpful and I think maybe the role of the Fund in helping low income countries deal with external shocks and that could be that topping up. Could I just push you a bit further on that and ask; as you gave us that graphic catalogue of numbers of the crisis in meeting the Millennium Development Goals, what if we were to take up suggestions by Christian Aid and others that perhaps poverty reduction strategies and perhaps the Poverty Reduction Growth Facility documents that the World Bank and the IMF actually produce should include estimates of the resources needed by each country to reach the Millennium Development Goals? Do you think that would be helpful?

Mr Brown: That is one way of looking at it. Our aim to win worldwide support for further funds is essentially to say here is the Monterrey deal that was agreed in Mexico, but in return for countries offering to tackle the corruption problems, the stability problems and dealing with issues associated with trade and investment, we should be prepared to provide that money. Almost every leader said that countries making these decisions to modernise their economies, to get them sorted out, should not be denied the resources for health and for education and development. So I see no difficulty, in theory, in doing what you are doing. The calculation, if I may say so, is that of the extra monies that are needed, at least 10 to 12 billion is needed for education spread across the countries we are talking about. 10 to 20 billion, and I think if you include the latest AIDS estimates, which are very serious indeed, is needed for health. Then other funds are needed for the anti-poverty programmes that are being carried out, including the removal of the burdens of debt. So the 50 billion figure is, I think, borne out by the World Bank studies and spread across the countries. You could reach a figure for each country, but I think you have got to retain the conditionality that we are talking about and if these reports simply say that "We need X" without saying "We are going to do Y" I do not think that that would be a best use of resources. The best use of resources is reaching this understanding that, in return for taking the measures that are going to bring economic strength and economic development first and then strength later, we are prepared to help finance the development of health, education and anti-poverty programmes. I think that that is something that the whole world is prepared now to sign up to and then, having signed up to it, we must find a way of getting the resources.

 

Q17  Hugh Bayley: Can I move on to the governance of the international financial institutions? The EU is represented by nine executive directors on the IMF, eight in the World Bank, and yet the 47 countries of sub-Saharan Africa have only two representatives between them. My question is this; how many countries can one representative reasonably represent? Should there be change? If so, what? And should there be a change in the voting strength as well to give a greater minimum vote to all participating countries? Specifically, I know the UK Government supports a change agenda, is there any hope that at the 2004 meetings changes will be made or progress will be made?

Hilary Benn: As you have indicated by your question, this is known as the Voice Agenda, but this is extremely important to us. You are absolutely right to ask the question in referring to the disparity in representation there is in the current structures. I think the honest answer is that we are going to need sustained effort in order to bring about some change. One of the outcomes of the Autumn meetings was that the Development Committee is going to be taking forward work on this, Trevor Manuel from South Africa will be leading that and there will be discussion in the Spring. Just to identify what the key issues are, one is transparency because we are very strongly in favour of greater transparency. For example, publishing the minutes of Board meetings. Not all members of the Board currently take that view, but it is something that we want to press on. Secondly, we are pressing for a 25^th seat for sub-Saharan Africa on the Bank and the Fund's Boards, which will be a big step forward. Others are not yet convinced that that is the right way to go. We do also support an increase in basic votes as part of any revision of the Articles. Then there is the question of the capacity to represent a large number of people in a constituency, which you referred to in asking the question. One of the things that we have done is to support the Analytical Trust Fund that has been set up, the UK has put £500,000 into that, which is going to try and help the developing country executive directors better represent their constituents because it is a lot of countries to look after, a lot of consideration to take into account when you are trying to express a view on behalf of all of them. So this continues to be a priority for us, but we have got to continue to work at it and, in fact, frankly persuade others to attach the same importance to it that we do.

Mr Brown: As far as the IMF is concerned, there will be a discussion of quotas at the next meeting in the Spring. The one cautionary note I would put in is that you could at this point spend ages, years, months, discussing these governance issues and it is right to want to get a better system, but it is wrong to divert all the resources of the political discussions to these issues when there are urgent issues of aid, debt relief and the provision of funds to be dealt with as well. So I think we have got to get this debate in its proper perspective. It will take time to persuade some of the people that we are talking to about the case for a 25^th seat as well as some further changes. These are important issues but we must get them in their proper perspective as to the urgency of dealing with funding issues.

 

Q18  John Barrett: If I can move into a slightly different area; a number of projects supported by the World Bank raised concerns over environmental impact and impact on indigenous people. Is the UK Government satisfied that there are enough safeguards before the World Bank is making investment decisions? Can you also answer about how DFID consulted with those most directly affected by World Bank decisions as to how it will affect them before the World Bank then moves on to make the decision?

Hilary Benn: Obviously a current example of this issue is the BTC pipeline about which, in fact, I have just written to all Members of the Select Committee. In that case the IFC has a pretty rigorous process for trying to assess a project like that. The truth with pipeline projects of this sort, as I said in the letter that I sent to Members of the Select Committee, is that there are benefits and there are risks and the question is how do you manage those. Our view is that having the involvement of ----

 

Q19  Chairman: I am sorry, I know the Chancellor is keen to get away. We are going to be asking you other questions about the IGC, so just to maximise the Chancellor's time, particularly as he is going to do nappy changing and stuff - so, Chancellor, thank you very much and I am sure we are going to continue on these issues. Thank you very much for sparing the time for us this afternoon. It is a very positive report and I think we have all been extremely grateful to you and your energy for taking forward the IFF.

Mr Brown: Thank you. I shall send you a note on the progress of the debt relief initiatives further to the questions you have raised. Thank you very much.

Hilary Benn: I think the involvement, in the case of this project, of the IFC and the EBRD, in due course if they decide to make a decision similarly to support it, increases the chances that the concerns that you have expressed in asking the question are going to be taken account of. It is partly a question of having the right policies and as far as our approach is concerned we cannot, with all of the decisions which these institutions are taking, go through our own process because in the end you have to trust the due diligence and assessment process of the institutions themselves. Although, in the case of BTC, as I indicated, we did ask consultants actually to review, because of the scale of the project and the concerns that have been expressed about it, to reassure ourselves that we felt that the process had been gone through properly and that that was the case. Looking at the concerns that have been raised, a lot of them are about implementation of the policies and therefore, as far as the IFC was concerned, in reaching a decision to support the loan in that particular case, one of the things that we got the IFC to agree to was that there would be a mechanism for bringing together round the table the people who have these concerns so that one can try and sort them out. I do believe very strongly, having thought long and hard about this, that the involvement of those international lending institutions increases the chances that you are going to be able to address these problems, whereas if they step back then it might be more difficult to do that.

 

Q20  John Barrett: Is there then a process by which an assessment can be made after the event to the impact that the decision has had on the poor people who are there rather than saying "We have made the decision and we are stuck with it"?

Hilary Benn: That is partly a question, obviously, for the country governments themselves and if we are taking the BTC pipeline as an example, Azerbaijan, Georgia and Turkey, they have an interest in and an incentive to do that because, certainly in the case of the first two, this will provide significant additional revenue to countries where there are a lot of poor people. Secondly, I think the consultation mechanism which is added to nine formal layers within the IFC set up does provide that opportunity to continue to ask what has been the impact, how can we sort out the problems and also how can we learn from these things in the future. I think the final point that I would make on this is that one of the other things that we asked the IFC to do in the case of this project was to say that in future would it be helpful if we had strategic environmental assessments, which did not apply in this case, because the truth is that we need to learn from these projects how they go so that we can manage them better in the future.

 

Q21  Mr Colman: Could I come in with a supplementary question? I was very pleased to go on a visit to Cameroon with a CPA visit led by Gwyneth Dunwoody and, of course, much of the concerns that have been talked about the BTC pipeline were also replicated in terms of the Chad Cameroon pipeline. The problem there is that while again all the warm words were said, very little was done. To what extent do you think the lessons of the Chad Cameroon pipeline, where on the ground implementation of dealing with issues to do with human rights, dealing with issues to do with environmental degradation should be dealt with before the pipeline is allowed to get started rather than what we found, which was a number of NGOs extremely critical of the work of the IFC and the World Bank, where they felt it had said all the right things but had not held up the work on the pipeline until these concerns had been dealt with on the ground?

Hilary Benn: In the case of the BTC pipeline, of course, the work has already begun and funding has now been found from other sources actually for the bulk of the cost of building this particular pipeline. So in that case it is not a question of holding anything up because it has already started. But as I indicated in answer to Mr Barrett's question, I think it is important that we learn from the process and obviously the Chad Cameroon pipeline is an important example in that respect. Linking it with the EITI that we were discussing a little earlier, BTC has agreed to publish what it pays, Georgia and Azerbaijan have agree to publish what they receive, and I think that is a very important part of the process because it gives us the transparency and therefore the accountability that I think all of us wish to see. At the same time, yes, we have to learn from the process and, yes, we have to make sure that the mechanisms that are in place are effective in trying to address the problems that are identified. Because you can have the policies, the question is how are they applied and what impact does it actually have on the ground and that is why we asked the IFC, in giving support to the loan in relation to BTC, to establish a mechanism which would ensure that there was a place where this could be done effectively so that people can get together and then argue about whether people are living up to what they said they would do in the first place.

 

Q22  Mr Colman: But, Secretary of State, you are describing an appalling situation where for the second time a major pipeline has gone ahead with the support of the IFC without ensuring that there is implementation on the ground of the promises laid down by the partners in the pipeline. Surely one of the lessons we learn on this is that no pipeline work should start until these requirements are met?

Hilary Benn: In the case of BTC, that could not be the case because the people building the pipeline decided to start the work, as I say, with financing from other sources. They have then come to the IFC for support as part of that process. Therefore there was never a question of the IFC saying "You cannot start the work". Having said that, I do hold the view, for all the difficulties which you raise, and I accept entirely, that it is better that there is the involvement of the IFC and in due course, if they take that decision, the EBRD because it gives us a better chance of having mechanisms which will address these problems than if neither of those institutions were involved at all, in which case people choosing to build a pipeline got finance from other sources and we would not have a chance, we would not have a framework, we would not have a forum in which these problems could be discussed.

 

Q23  Chairman: Secretary of State, I think that is all we are going to ask about the World Bank and the IMF. You very kindly agreed to answer some questions about the IGC. Before you do that, can I just trespass on your goodwill and if you do not want to answer this it is absolutely fine, but DFID today published a short news release about funding for Iraq, 33 billion for Iraq, commitment in Madrid, and then this works through to a reduction of 100 million over the financial year 2004/2006 for middle income countries from the DFID budget. On the one hand, 100 million does not look like a lot of money. On the other hand, as I understand it, it is going to mean that a country like Peru will no longer have any DFID support at all. Having actually been in Lima in the Summer and seen the work that DFID was doing there, it was actually really useful work. I suspect that the concern of many of us is not point scoring over 100 million or whatever, it is the kind of principle of these big humanitarian situations like Afghanistan, Iraq and so forth, to what extent is your contingency reserve going to get rolled over in the sense of having to find more money from core programmes? Do you see this as a one off once and for all or do you see more money being eaten away at the edges here to fund Iraq and elsewhere? I think we are really just searching after a factual explanation of what is happening rather than ----

Hilary Benn: With the greatest of pleasure. I am very glad that you raised that, not least because I have also presented a written parliamentary statement today referring to a news release. Do you see what I mean? Parliament have been informed and I have informed the media in other ways. The origin of this is really two fold. One is yes, the need to find additional funding for Iraq, particularly around the pledge that we made at the Donors Conference. A lot of that money has come from the central contingency fund, our own contingency, but some of it has come from the funding that we make to middle income countries. As you know, technically, currently, Iraq is assessed as being a low income country because that was the outcome of the World Bank UN needs assessment, although we expect it quite soon to move back into middle income country status. So that is the first driver of this. The second is that we have a commitment and a PSA target, as you know, to by 2005/6 spend 90 per cent of our bilateral programmes on the poorest countries of the world. That means you have, within the context of a rising aid budget, and it is obviously very important to recognise that, that the budget is going to increase over the next couple of years by just under a billion pounds and that is very significant. That will allow us, for instance, to meet the target of a billion pounds for Africa. So we have had to make the adjustment both to find some of the money for Iraq, which is currently a low income country, and secondly, to keep within the 90 per cent 10 per cent split. Now, I hold very strongly to that because I think it is right and proper that we should focus our effort, particularly in the poorest countries, and this is, I am anticipating, one of the issues that we may come on to when we look at the IGC and the EU. One of the arguments we have been having consistently with the European Union is that in its development spending we want it to spend more of that money on the poorest countries of the world. Their percentage currently is about half, whereas we are heading towards 90 per cent and we are very wedded to that. The consequence of that is that we have had to make some adjustment to the programmes. I have in the statement today outlined what that adjustment is going to be, although, to be honest, we are still in the process of working out the precise details of that in terms of exactly what the size of the programmes are going to be. I would say, in relation to Latin America, two things. One is this will still leave us, including Iraq, with a middle income country programme bilaterally of just over £200 million. We also, of course, make a very substantial contribution through the multi-laterals to work in middle income countries. The last figures we got are for 2001/02 and that was £350 million out of our multi-lateral contribution went to middle income developing countries. I am also keen that we should use our civil society challenge fund to look at some work that we might be able to do in some of these countries, including regionally across Latin America. There are some difficult decisions, and I will not hide them from you or Members of the Committee, that we have had to take in reaching this decision, but I thought it was right and proper to protect the 90 per cent target for 2005/6. I think that is very important. In truth, one of the things that this Department has got to do is to respond to situations as they arise and Iraq is, by definition, a situation that has arisen. It is very important, for reasons that you probably do not want to go into this afternoon, that the support is applied now at the time when it can make the maximum difference to ensuring that Iraq recovers because once we get to that point then, of course, with its history, its culture, its wealth, its highly educated population, its middle income history, if we can get the politics right then there is no reason why it should not recover. But I do appreciate you raising the question with me and I would be very happy to discuss this further with the Committee at any time.

Chairman: Now is not the time, but maybe some time next year we could look at what ways are there of maximising the synergy between multi-lateral institutions, the EU and others for Latin America because I think comments like John Battle, who knows Latin America better than most of us, that there are a phenomenal number of very poor people in Latin America and I think sometimes this notion of middle income countries, you might have some extraction industries which are doing quite well but most of the money goes out of the country. I fully understand your situation, but perhaps we therefore need to work out, particularly with the EU, how we focus this money not just in Latin America but also in Central Asia and some of these other areas.

 

Q24  Chris McCafferty: Secretary of State, given what you said about the development spending, what is your view of EU development policy and practice being represented, developed, implemented and scrutinised by a commissioner for development and possibly a reactivated development council or a European parliamentary committee? Will the United Kingdom Government call for this under the IGC and order EU policy debates?

Hilary Benn: We certainly support the idea of a development commissioner with full voting powers. We are very keen that a development commissioner should cover all of the development programmes, covering both policy and implementation because, as the Committee will be aware, one of the difficulties with the structure at the moment is that different people have got different responsibilities and it is a bit diffuse in the way that it works. So we do support, for that reason, a unified, simplified development structure. We did, as a Government, agree to the abolition of the Development Council as part of the Seville arrangements in the interests of trying to reduce the number of councils overall but, as you will be aware I am sure, this is now covered by the Development Affairs and External Relations Council. Twice a year there is a particular development focus to those meetings and indeed that will be the case at the meeting I will be attending the week after next. There are also continuing to be development ministers' informals taking place, which is a good opportunity within the ambit of the EU to bring people together to discuss these issues and, of course, there continues to be a European Parliament Development Committee. So the most important thing is that there is a coherent structure for doing the business and we would like to see that come out of the changes that will flow from the IGC and the consideration of what the new structure of the Commission is going to look like because, in the end, with the right structure we can maximise the chance that an EC development agency is going to be used effectively.

 

Q25  Chris McCafferty: I know that you said that there were many other meetings throughout the year, but do you think that formal meetings twice a year is adequate when we are looking for changes in how the EU spends its development money?

Hilary Benn: I could say that it depends very much on how the time is spent. I would say from my own experience that getting the organisational structure right, hence our desire for a development commissioner with policy and implementation under his or her responsibility, and making sure that the reform programme which the EU is engaged upon works is more important for making sure that this very substantial sum of money you were referring to, Mr Chairman, in responding to the last question and what I had to say on that, is more important because I think that is where we ought to prioritise our efforts and our energy because that is where I think we can make the biggest difference. Having said that, there is a big argument still to be had about the poverty focus and the truth is that with the new accession states coming in they have brought with them, in effect, their own new nearer abroad. One of the tensions, and we have to be straight about it, is between those countries that think particularly about development in the countries that are just on their border just outside the EU, as opposed to those who take a different view, and that includes ourselves, that the EU actually should be spending a lot more of its money and a higher proportion of its money on the poorest people of the world. So, if you like, it is reflecting the logic of the 90/10 position that we have adopted as a Department for the reasons I tried to explain and getting the EU to move in the same direction, but there is that tension at the heart of the discussions and they are reflected in the General Affairs Council when it looks at these matters.

 

Q26  Hugh Bayley: At the risk of sounding a little bit too like Bill Cash for my own good, I have been comparing Article 32-10 of the Draft Treaty with Article 1-40 of the Treaty. 1-40 says that "The common security and defence policy will have a role in peacekeeping, conflict prevention, strengthening international security" and then Article 32-10 says "In the pursuit of those objectives a variety of civilian and military means may be used, including humanitarian tasks". Our Committee is fearful that humanitarian objectives could become subsumed as part of a common security and defence policy, particularly when the particular Article in question says that all these tasks, including, of course, humanitarian and rescue tasks, may contribute to the fight against terrorism, including by supporting third countries in combatting terrorism in their territories. If that were to lead to humanitarian policy becoming subordinate to security and defence policy, it might well undermine the practical and moral foundation of humanitarian policy and it is something which many humanitarian actors in every conflict that I can remember have warned against. What can the UK Government do to ensure that it is development considerations that drive development policy, including humanitarian assistance?

Hilary Benn: As the quotes which you have just drawn my attention to illustrate, the treaty is not really clear on this. I think that is the problem and therefore it is a matter of interpretation. Obviously we seek to try and address those inconsistencies and lack of clarity in the issue of the text. But I share with you entirely the view that the fundamental principle that humanitarian aid is impartial and should be based on that is something that we must hold to. In picking up the second part of your question, what we have got out of the IGC process, and the development community across the EU has worked very hard to try and ensure that this was the case, is that we have got separate chapters on development, co-operation and humanitarian aid which reflect, I think, a very clear legal framework for the EC's relations with developing countries. We have now got poverty eradication stated clearly as an objective of the Union's development policy. We have also got coherence. In other words, that development objectives should be taken into account in considering relations with third countries is also a central part of the new IGC. If I can just say in passing that the fact that it was moved from the Development Chapter to the External Actions Chapter does not, in our view, in any way change its effect. Indeed, you could argue that it enhances the development perspective in considering the work that is done with third countries. So I think those have been important outcomes because we need a good, solid, clear legal basis for this work, but I am very alive to the point that you make, Mr Bayley, about ensuring that humanitarian aid is not affected and those fundamental principles, which you rightly say the NGOs and others working in this field hold to very, very strongly, we understand.

 

Q27  Mr Battle: I am not sure whether I should not be declaring an interest, Mr Chairman, because DG8, as it was, paid my salary to do research on the first Lomé Convention and in those days there was an incredible amount of idealism about Europe's approach to development and I just fear that in this new Constitutional Treaty that is all being washed away and that idealism about development we need to turn into practical action. I would just like to echo, although I share Hugh's concerns and the whole Committee does, to put forward some practical suggestions, if you like. Why can the Constitutional Treaty not actually strengthen the international voice for development? Go the other way; follow its great lead from the beginnings. Why can it not ensure that the treaty builds relations with developing countries that would actually set out in the 2000 EU Development Policy Statement? Make a link to that. Why can it not build in now implementing the Millennium Development Goals as part of the mission of the European Union and build that into the Constitutional Treaty? Because I think that would send a very different signal from the one that we are getting now.

Hilary Benn: If you are describing what I think are the achievements in the negotiation in drawing up the new Treaty, I think we should not underestimate the importance of the separate chapters to which I have referred and the reference to the development objectives being taken into account as far as external actions in the jargon are concerned and that poverty eradication is an essential objective. It seems to me those are all very important things. As you will know, Mr Battle, a lot of time, effort and energy is going into the negotiation of this treaty. There are some things in that people want out, there are other things that are not there that people want in. In the end, I think what matters is the legal basis and the words in the Treaty are never going to be a substitute for political commitment. I know that whenever you bring up the subject of a constitution or a treaty and you discuss what the words are, people get very exercised, and understandably so, about precisely what those words say. But I think in this field of development, perhaps more than any other, it is the political commitment that you can have or not have, regardless of what the words say in the Treaty and I would have said that the thing that we need to focus our effort and energy on is persuading more people, more of our European partners, to understand the arguments that we are making, in particular about poverty focus. You raised the point of the Millennium Development Goals, would it not be nice if we had that written in. We will have a better chance of meeting the Millennium Development Goals if the EU spent more of its development aid on the poorest countries of the world. So there is a very simple thing. You do not need change in the Treaty to do that. That is a question of political will and it is the political will that we need in Europe for them to move more in the direction in which we are travelling, which is to maximise our development aid and effort in the places where it can make the biggest difference.

 

Q28  Mr Khabra: As you know, the legal basis for development co-operation was recently undermined as a result of the amendment at the IGC Conference. This actually has removed the differentiation between development assistance and official aid. Can I ask you that as improving the poverty focus and effectiveness of EC aid is a key objective for the UK Government and consistent with DFID's latest public and delivery agreement, could you tell me what steps has the UK Government taken to ensure that a clear legal basis for development co-operation is reinstated? This is a big question, I think.

Hilary Benn: Indeed it is and the Development Co-operation Article did not specify what was meant by a developing country, but the third countries Article 3-221 did refer to other developing countries and therefore it was implicit that there was a distinction between the two. Then that was removed. We are working very hard to get that back in and I think the indications are that we will be successful on that front because I share the premise of your question, which is it is very important there is that clear distinction for the reasons that you outlined. So I hope very much that we are going to be able to get that one sorted.

 

Q29  Mr Khabra: But what are the reasons actually that they take a decision like that?

Hilary Benn: Who is to say, because there are two parallel processes going, Mr Khabra. One is the political discussions about the big issues and then there is a kind of legal textured debate and people look at things and refine them and some things may be inadvertently removed or people may not full understand what the consequences are. That is why we are dealing with it at that level and that is why I hope very much that we are going to be able to sort it out because we attach great importance to that distinction.

 

Q30  Mr Khabra: It is more like a political issue like the one the UK Parliament is facing at the moment on security and foreign policy.

Hilary Benn: That is at the higher level and this is one I hope we can sort out by administrative means, if I may describe them as that.

 

Q31  Chairman: Thank you very much. We have gone on too long but really due to circumstances beyond our control. I think who knows to an extent what is going to happen on this, but I very much hope you will put in a bid for an informal Development Council meeting in the latter part of 2005 when the UK has the Presidency because that will give an opportunity both to looking at where we have got to with the Millennium Development Goals because that will be 2005 and I think this Committee is going to be trying to do some work on that in the first part of 2005, and also give you a good opportunity of taking stock of just where you are with the constitution because it will have been in for a bit and that would be rather a good opportunity for whoever is Secretary of State at that time to do that. Mr Colman is just observing that the new Leader of the Conservative Party is doing a walkabout in his constituency at this very moment as he has to win it to secure a majority of one. Order, order. Thank you very much.